Archive for December, 2021|Monthly archive page


In Uncategorized on 12/08/2021 at 01:08

My preparer colleagues are even now standing to their kit and bracing for the inundation of client requests for tender loving care and understanding as said clients drop off shoeboxes, totebags, and multi-part accordion envelopes (of the kind generically referred to by their older compères as RedWelds, a well-known brand).

These contain receipts, credit card statements, bank statements, brokerage statements, real estate closing statements, and pieces of paper “wretched, crinkled, scrawled over, blotched, frowsy.”

And from these, my colleagues and their trusty software craft the tax returns that furnish grist to today’s creaking mill in the Second Street, NW, Glasshouse.

DAWSON Opinions search function, restored, shows us that even the shoebox or RedWeld recordkeeping system, if the same as mother made, will stave off the Section 6662(a) chops. And though in the case of Maryann Patacsil, Docket No. 21903-19, filed 12/7/21*, much of IRS’ asserted unreported income and sketchy deductions o’ercrow Maryann’s little envelopes showing the expenses of her CA care home operations, Maryann escapes the chops.

CA care homes are residences for the serious disabled, or what are called group homes back East. Maryann got her learning from her Mom. Judge Holmes is at pains to point out Maryann’s engaging personality, care for her “consumers,” and her lack of accountancy or tax background. Mom was a “little envelopes” type of bookkeeper, the kind who dumps them on your desk and tells you “go to it.”

Most important, the years at issue were the early years of Maryann’s operations on her own.

“She had grown up in a business in which accounting system was bookkeeping via envelopes and receipts turned over to one’s CPA at the end of the year. Under these very special circumstances for these years early in her business career, I find she was reasonably relying on her mother and the accountant so I won’t sustain the penalty for her in any of these three years.” Transcript, at p. 19.

OK, preparers, “look how it comes again.”

*Maryann Patacsil Docket No. 21903-19 12 7 21



In Uncategorized on 12/08/2021 at 00:21

Y’all will recollect that IRS’ virtuous trial counsel, discovering controlling contrary precedent downGolzenized to James E. Hansen & Helen R. Hansen, Docket No. 16157-18, filed 12/7/21*, brought same to the attention of Judge Morrison, earning him a Class A diss from his fellow IRS counsel. If not, see my blogpost “A Current Example,” 11/4/21.

Well, IRS’ virtuous attorney may have earned the scorn of his mates for following ABA Model Rule 3.3(a)(2), but Jim & Helen R want Section 7430 legals and admins.

So Judge Morrison orders a volley of responses. Will Jim & Helen be rewarded for IRS counsel’s virtue? Stay tuned.

*James Hansen & Helen Hansen Docket 16157-18 12 7 21


In Uncategorized on 12/07/2021 at 14:54

The Tax Court website reports a major outage, which commenced an hour ago. The Genius Baristas are scrambling to restore Opinions and Orders, but no ETA for restoration.

Just before Opinions slid into murk, I saw an off-the-bencher by Judge Mark V Holmes, that I wanted to blog for the interface of the shoebox or Red-Weld method of tax recordkeeping with the Section 6662(a) chops.

But we’ll have to wait for it.


In Uncategorized on 12/06/2021 at 14:23

Once again The Glasshouse Gang have reached out to the sidewalks of New York, and tapped the former Taxpayer Advocate in the New York City Department of Finance to join the Special Trial Judge team. So let’s welcome STJ Eunkyong (“N’Yawk “) Choi to the Tax Court Special trial bench.

And while we’re in a welcoming mood, let’s welcome STJ Adam B (“Sport”) Landy, who joins from OCC.

Glad to see the Tax Court bench adding talent, as the petition tsunami rolls on. I’m sure these new STJs will hit the ground running.

Here’s their stories.


In Uncategorized on 12/06/2021 at 13:28

I’ve just concluded an e-mail volley with my colleague Peter Reilly, CPA. Mr Reilly asked why I hadn’t blogged Estate of Prince R. Nelson, Deceased, Comerica Bank & Trust, N. A., Executor, Docket No. 11442-21, 11/30/21*. It seems the case has been picked up by the trade press, due to the high profile of the decedent in the popular music line.

I replied that I hadn’t, because the order was routine. Besides which, if the trade press had discussed it, I was not minded to tag along. Mr Reilly noted the stip of settled issues was available from the documents department at Tax Court, and, as the case is settled pending local probate court approval, the stipulated decision will doubtless be sealed. Moreover, the particular trade press outlet that carried the most commentary was locked behind a paywall. So, to spare the frugal, would I, who make my blog free to all comers, cover the story?

No; I’m as frugal as they, if not more so. If the document is not sealed, anyone can order a copy, for the same fifty cents per page, three-buck cap.

But more to the point, I remembered that our colleague, Mr Paul Streckfus, deplored the sealing of stipulated decisions. Not only must justice must be done; justice must be seen to be done.

On the same day that Judge Holmes issued the order in Nelson, Judge Albert G (“Scholar Al”) Lauber issued his opinion in James R. O’Donnell, 2021 T. C. Memo. 134, for which see my blogpost “Bring Them Into Compliance,” 11/30/21.

It’s not “in the interest of government,” said Judge Scholar Al, that a habitual non-filer who ran up a tax tab north of $2 million over a two-decade stretch should buy his way out at a dime on the dollar, even if he was dead broke and IRS couldn’t get any more.

But even more to the point (and yes, dear readers, there definitely is one this time), I can’t say it better than Judge Scholar Al: “Because reports of accepted OICs are publicly available, see sec. 6103(k)(1), the IRS may reject an OIC if it determines that the ‘public reaction to the acceptance of the offer could be so negative as to diminish future voluntary compliance,’ see IRM pt.” 2021 T. C. Memo. 134, at p. 12. (Emphasis added).

“Publicly available,” forsooth. So people can see if IRS is letting some animals who are more equal than others off the hook on the cheap.

OK, US Tax Court. OK, Genius Baristas and 18Fs (if you latter types are still around trying to “improve the way the US Tax Court engages with the public”; aye aye, roger that, most F affirmatory). Why are these stipulated settlement orders not publicly available at no charge on the website? Rule 27(b)(2)(B) says the website shall contain “any opinion, order, or decision of the Court.”

*Estate of Prince R Nelson Docket No 11442-21 11 30 21


In Uncategorized on 12/03/2021 at 12:25

While the United States of America has no official language (despite various attempts to legislate one), and while the question whether there should be such a one has great political philippic potential, nevertheless and notwithstanding, the United States Tax Court conducts its proceedings in English. See Administrative Order 2020-02, 5/29/20, which provided, in pertinent part: “All Court proceedings are conducted in English. All documents must be filed in English or include a certified English translation. You should let the Judge know as early as possible that you require help with English. It is generally the responsibility of each petitioner to bring an interpreter. If you give advance notice, the Court may have one available.”

However, this Admin Order was terminated by Administrative Order 2021-01, 8/27/21, which omits the above cited language.

My readers will doubtless recall Judge Albert G (“Scholar Al”) Lauber dealing with German in my blogpost “The German Invasion,” 9/17/20; Judge Elizabeth A (“Tex”) Copeland dealing with Spanish in my blogpost “LITC and VITA,” 8/20/19; and Judge Mark V Holmes being bemused as the Golden Gophers’ interpreter tries to translate “negative amortization” into Oromo, which is “an Afro-Asiatic language, of the Cushitic branch, and is the most widely spoken language in Ethiopia.” For that gem, see my blogpost “The Golden Gophers Win One,” 5/6/14.

Be all the foregoing as it may, Ch J Maurice B (“Mighty Mo”) Foley eschews the role of polyglot in Justino Hernandez Larios & Teresa Salazar Barranco, Docket No. 18751-21, filed 12/3/21*.

Justino & Teresa filed “an imperfect petition written entirely in Spanish. Petitioners did not attach a Notice of Deficiency to the Petition.” Order, at p. 1.

Ch J Mighty Mo tells them to amend in English, concisely and clearly setting forth assignments of error and facts in support of each thereof. And send in the sixty bucks.

Think maybe so it might could be time for a Rule about languages, Ch J?

*Justino Larios & Teresa Barranco Docket No 18751-21 12 3 21


In Uncategorized on 12/02/2021 at 15:33

This time it’s not the petitioner who plays the game, but his daughter, who files MFJ with estranged spouse (to whom she’s still married, although living apart). The petitioner meanwhile files HOH and for child tax credit, dependencies, and EITC for his minor grandchildren, whom he supports and who live with him for the requisite.

His trusty attorney claims IRS foot-faulted by not pleading as an affirmative defense the MFJ filed by daughter and spouse for year at issue, taking the grandkids as dependents, etc. But STJ Peter (“HB”) Panuthos rejects that in a footnote to a Section 7491(c) BoP shift.

Here’s the footnote in Nowran Gopi, 2021 T. C. Sum. Op. 41*, filed 12/2/21, at p. 6, footnote 4,

“In the alternative petitioner asserts that respondent bears the burden of proof in this matter because respondent’s determination was based upon the production of a [year at issue] joint tax return filed by petitioner’s daughter and her husband. Petitioner claims that the production of said tax return constitutes an affirmative defense under Rules 39 and 142(a). Rule 39 describes the pleading of special matters. The introduction into evidence of Ms. K and Mr. E’s [year at issue] joint tax return is not a special matter and does not constitute an affirmative defense.” (Names omitted).

Gowran never claimed Ms. K wasn’t married to Mr. E, nor that their return for year at issue was invalid. Whatever their domestic problems, apparently they were married and did take Gowran’s grandchildren on their 1040 MFJ.

I do think that IRS should have pled K and E’s 1040 MFJ. Rule 39 is more expansive than STJ Panuthos states here. But this is a small-claimer, where the Rules are relaxed both ways.

Note IRS folded the Section 6662(a) chop. This saves STJ Panuthos from deciding whether Gowran’s lack of knowledge of K’s marriage and MFJ filing would give him a good faith win on the chops. It’s an interesting question, but perhaps resolution should await a fully-briefed bigtime case.

*Nowran Gopi 2021 T C Sum Op 41 12 2 21


In Uncategorized on 12/02/2021 at 12:02

When CSTJ Lewis (“Spelled Right”) Carluzzo issues an invitation, it’s well to heed it. While he may not be able to give recusants the Luke 14:23 treatment, it may yet be unpleasant to say “no.”

CSTJ Lew extends the invitation to Nivaldo Souza & Ivonete Souza, Docket No. 32006-21*, filed 12/2/21, after tossing their petition for failure to state a claim.

“Petitioners’ attention is invited to I.R.C. section 6673(a). If it appears to the Court that a taxpayer’s position in a proceeding before the Court is frivolous or groundless, then the Court can impose a penalty (not to exceed $25,000) on that taxpayer.” Order, at p. 1.

And it’s beginning to look a lot like frivolity to CSTJ Lew.

No chop today, but heed the invitation.

*Nivaldo and Ivonette Souza Docket No 32006-21 12 2 21


In Uncategorized on 12/02/2021 at 10:58

See my blogpost “The Proofreader’s Reward,” 2/16/16, for a prelude to this aubade.

That irrepressible couple, Gregory J. Podlucky & Karla S. Podlucky, Docket No. 453-17, filed 12/2/21* (a plethora of palindromes this week), are back again. Notwithstanding Karla’s Van Cleef & Arpels custom-made baubles and Greg’s $4 million-plus in unpaid tax and chops (see my blogpost “The Woman in the Case,” 10/21/21), Greg & Karla plead poverty.

And big-hearted Judge Albert G (“Scholar Al”) Lauber bought their tale of destitution.

“On October 20, 2021, petitioners filed a motion requesting that the Court pay the cost of securing for them a transcript of the trial, alleging that they lacked the funds necessary to pay the cost. We granted that motion on October 29, 2021. The trial transcript, consisting of 457 pages, was posted to the docket record of this case on November 3, 2021.” Order, at p. 1.

While I’m usually genial at this season of anticipation, I note that, although “the Court” wrote the check, the US taxpayers, of whom I am one, paid the cost of the transcript. I’d like to see for myself just how broke Greg & Karla are.

OK, so what’s done is done. But that doesn’t stop Greg & Karla from going for it on fourth down.

“…petitioners filed a Motion for Audio of Trial Proceedings, requesting that the Court ‘pay the cost of the duplicating of the video and audio’ of the trial. As grounds therefor they note that the transcript (which they admit having received) includes instances where two speakers spoke concurrently, as indicated by brackets containing the words ‘indiscernible, simultaneous speech.’ Petitioners assert that the transcript for this reason ‘is not indicative of the trial proceedings,’ risking violation of their ‘Fifth Amendment right to due process.’ Order, at pp. 1-2.

Judge Scholar Al, courteous as always but finally out of patience, denies. In 457 (count ’em, 457, and Judge Scholar Al clearly has) pages, Judge Scholar Al finds “relatively few” instances where the reporter had to note talkovers, and those only for a line or two. None “detracts even slightly” from comprehensibility, Order, at p. 2.

So Judge Scholar Al gives counsel and petitioners a conversation easement: they can talk over each other, provided the meaning stays clear.

Anyway, if the transcript is unclear or erroneous, parties can move to correct, although Judge Scholar Al does not cite Rule 85(e). The Rules’ proclivity for motions seems to me excessive in this case. Our New York Civil Practice Law and Rule 3116(a) requires the deposed to note their objections and corrections in writing at the end of the transcript, and sign and return the same.

Much simpler.

*Gregory & Karla Podlucky, Docket No 453-17 12 2 21


In Uncategorized on 12/01/2021 at 16:39

I’ve often blogged about petitioners losing their small claimer status (the S suffix on the docket no.) when they cross the $50K line, despite fighting to keep it. But today Hong Jun Chan and Suzhen Mei, 2021 T.C. Memo. 136*, filed 12/1/21, claim they filed Forms 1120 in two (count ’em, two) consecutive years, so the S Corp election they filed for Younique Café, Inc., is gone. Hence, Younique plays no role in their individual tax status, as it’s a separate taxpayer.

Except Judge Albert G (“Scholar Al”) Lauber says that isn’t how you do it.

“Once an entity elects S corporation status, the election is effective ‘for all succeeding taxable years.’ Sec. 1362(c); see Mourad, 121 T.C. at 4 (‘An election to be an S corporation continues until terminated.’). The election will be terminated if and only if (1) the shareholders make an affirmative revocation, (2) the entity ceases to be a ‘small business corporation,’ or (3) the entity’s passive investment income exceeds 25% of its total gross receipts for the previous three years. See sec. 1362(d). Petitioners do not allege that any terminating event occurred during [years it issue] (or previously). They thus have no basis to dispute that YCI was an S corporation during [years at issue]. As a shareholder of YCI, petitioner husband is taxed on a pro rata basis. See sec. 1366(a)(1)(A).” 2021 T. C. Memo. 136, at pp. 9-10.

Hong Jun and Suzhen filed 1040 MFJs for the years at issue, but never mentioned Younique. IRS subpoenaed bank records, and found an aggregate of $1.9 million in taxable deposits. Hong Jun and Suzhen proffer professionally-prepared but undated 1120s, with no evidence that these were ever sent to IRS. And IRS says their records show Younique never filed nuthin’. So, says IRS, it all belongs to Hong Jun and Suzhen.

But the SNOD here is problematic. IRS wants to stick Hong Jun with the whole gross income, or in the alternative do a community-property split between Hong Jun and Suzhen. The problem is, the 2553 shows Hong Jun owned 40% of Younique’s stock, but the remainder is split 30% and 30% between two unnamed nonparties.

Howbeit, the 1120s do show expenses, and Hong Jun claims Younique lost money and subsequently cratered.

IRS wants summary J on the tax status of Younique as an S Corp (granted), and on the deficiencies, add-ons, and chops (denied).

“Proceeding pro se, petitioners in their petition did not dispute the RA’s numbers. But the Forms 1120 attached to their responses show different revenue figures for YCI (on a fiscal year basis). The RA allocated 100% of YCI’s gross income to petitioner husband, but the Form 2553 shows him as owning only 40% of YCI’s shares. There is no evidence in the current record to show that the ownership interests changed. Taking these facts together, and making allowances for petitioners’ pro se status, we conclude that the determination of YCI’s gross income for [years at issue] (and petitioners’ pro rata shares of its income) should be reserved for further proceedings.

“The RA allowed no deductions for cost of goods sold or the expenses incurred in operating the restaurant. The burden of proving entitlement to deductions and credits is on petitioners. See Rule 142(a); INDOPCO, Inc. v. Commissioner, 503 U.S. 79, 84 (1992). The Forms 1120 attached to their responses allege that YCI incurred significant costs for (among other things) food, rent, wages, and utilities, allegedly generating losses for both years. It is obvious that the restaurant incurred expenses, and we think petitioners should have the opportunity to prove what they were. Their liability for a penalty for [Year One] and for additions to tax for [Year Two] likewise raises factual questions.” 2021 T. C. Memo. 136, at p. 12.

Business operating numbers rarely make good grist for the summary J mill.

*Hong Jun Chan and Suzhen Mei 2021 T C Memo 136 12 1 21